Gross Receipts Safe Harbor for Determining Eligibility for the Employer Retention Credit.

IR-2021-167

The Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) issued a safe harbor allowing employers to exclude certain items from their gross receipts solely for determining eligibility for the Employee Retention Credit (ERC).

Revenue Procedure 2021-33 provides a safe harbor permitting employers to exclude certain amounts from gross receipts solely for determining eligibility for the ERC. These amounts are:

  • The amount of the forgiveness of a Paycheck Protection Program (PPP) Loan;
  • Shuttered Venue Operators Grants under the Economic Aid to Hard-Hit Small Businesses, Non-Profits, and Venues Act; and
  • Restaurant Revitalization Grants under the American Rescue Plan Act of 2021.

An employer elects to apply the safe harbor by excluding these amounts for determining whether it is an eligible employer for a calendar quarter for purposes of claiming the ERC on its employment tax return.

The employer must exclude the amounts from their gross receipts for each calendar quarter in which gross receipts are relevant to determining eligibility to claim the ERC. The employer claiming the credit must also apply the safe harbor to all employers treated as a single employer under the aggregation rules.

An employer is not required to apply this safe harbor, and the safe harbor does not permit the exclusion of these amounts from gross receipts for any other federal tax purpose.

The full IRS press release can be found here.

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Tax Relief for Severe Storm victims in Michigan (June Storms)

Wayne and Washtenaw County Severe Storm and Flooding Victims will be eligible for relief.
Any filings or payments that were due between June 25, 2021 and November 1, 2021, are now due on November 1, 2021. Please see the link below for the full IRS announcement.

https://www.irs.gov/newsroom/irs-announces-tax-relief-for-victims-of-severe-storms-flooding-and-tornadoes-in-michigan

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Advance Child Tax Credit Payment Portal

The Portal to be unenrolled from the Advance Child Tax Credit payments is active. The deadline to unenroll from the July payment has already passed, but you can make the change for the remaining payments. Use this link to get the the portal, as well as additional information regarding the payments.

Some things to note:

1. You will need an existing IRS username, or an ID.me account (you will have the option to create one if you do not already have one) in order to access the portal.
2. Once you are unenrolled from receiving the advance payments, you can not re-enroll at this time. There may be an option to do so in September.
3. If you filed your most recent return jointly, BOTH SPOUSES MUST UNENROLL. If only one spouse is unenrolled, you will still receive half of the advance payment.

If you have any additional questions, please contact our office.

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Scammers Using Fake Letters in Collections Scam

The Michigan Department of Treasury has issued the following release:

LANSING, Mich. – Michigan taxpayers with past-due tax debts should be aware of an aggressive scam that’s making the rounds through the U.S. Postal Service, according to the Michigan Department of Treasury (Treasury).

In the scheme, taxpayers receive a letter about an overdue tax bill, asking individuals to immediately contact a toll-free number to resolve an outstanding state tax debt. The letter aggressively threatens to seize a taxpayer’s assets ― including property and Social Security benefits ― if the debt is not settled.

“This is a tricky scam that has been reported throughout the state,” said Deputy State Treasurer Ann Good, who oversees Treasury’s Financial and Administrative Services programs. “Taxpayers have rights. If you have questions about an outstanding state tax debt, please contact us through a verified number so we can talk about options.”

The piece of correspondence appears credible to the taxpayer because it uses specific personal facts that’s pulled directly from publicly available information. The scammer’s letter attempts to lure the taxpayer into a situation where they could make a payment to a criminal.

The state Treasury Department corresponds with taxpayers through official letters sent through the U.S. Postal Service, providing several options to resolve an outstanding debt and information outlining taxpayer rights.

Taxpayers who receive a letter from a scammer or have questions about their state debts should call Treasury’s Collections Service Center at 517-636-5265. A customer service representative can log the scam, verify outstanding state debts and provide flexible payment options.

As always, if you have any questions, please contact our office.

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Rollover relief for RMD’s from retirement accounts that were waived under the CARES Act

IR-2020-127, June 23, 2020

WASHINGTON — The Internal Revenue Service today announced that anyone who already took a required minimum distribution (RMD) in 2020 from certain retirement accounts now has the opportunity to roll those funds back into a retirement account following the CARES Act RMD waiver for 2020.

The 60-day rollover period for any RMDs already taken this year has been extended to August 31, 2020, to give taxpayers time to take advantage of this opportunity.

The IRS described this change in Notice 2020-51 (PDF), released today. The Notice also answers questions regarding the waiver of RMDs for 2020 under the Coronavirus Aid, Relief, and Economic Security Act, known as the CARES Act.

The CARES Act enabled any taxpayer with an RMD due in 2020 from a defined-contribution retirement plan, including a 401(k) or 403(b) plan, or an IRA, to skip those RMDs this year. This includes anyone who turned age 70 1/2 in 2019 and would have had to take the first RMD by April 1, 2020. This waiver does not apply to defined-benefit plans.

In addition to the rollover opportunity, an IRA owner or beneficiary who has already received a distribution from an IRA of an amount that would have been an RMD in 2020 can repay the distribution to the IRA by August 31, 2020. The notice provides that this repayment is not subject to the one rollover per 12-month period limitation and the restriction on rollovers for inherited IRAs.

The notice provides two sample amendments that employers may adopt to give plan participants and beneficiaries whose RMDs are waived a choice as to whether or not to receive the waived RMD.

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PPP Reforms pass the House and Senate, President signs bill into law

The U.S. House of Representatives and Senate passed a bill that changes the forgiveness requirements for PPP loans.  Today, President Trump signed the bill into law.

The reforms include:

  • Extending the 8 week forgiveness period to 24 weeks
  • Reducing the payroll expense requirement to 60% from 75%
  • Extending the loan repayment period from 2 years to 5 years for any portion not forgiven

For more details, please see this article.

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Update for CARES Act – Actions to Take

The CARES Act was signed into law by President Trump on March 27, 2020, containing several provisions to aid small businesses during the COVID-19 crisisAt this time, we are still waiting for guidance and clarification of many items in the law 

 We recommend the following actions at this time: 

1. Apply for an Economic Injury Disaster Loan (EIDL) at the SBA website. You will need to provide information for your gross receipts and cost of goods sold for the period 2/1/19 – 1/31/20. The SBA will use this information to compute your loan amount. Be sure to check the box to receive an advance of up to $10,000. The $10,000 advance is a grant which will not have to be repaid. 

Apply at https://covid19relief.sba.gov/#/. Please contact our office if you would like assistance in completing the initial loan application process. 

Once the initial application process is complete, the SBA will likely need additional information to determine your eligibility and to calculate your total loan amount. 

2. Begin gathering information to apply for a Paycheck Protection Program (PPP) loan. These loans will be administered by banks and credit unions. The PPP funds may be used for payroll costs, rent, utilities, and interest expense. The loan will be forgiven to the extent the funds are used for qualified funds during an eightweek period. The Treasury is expected to release additional information by Friday, April 3, 2020. If you have worked with an SBA lender in the past, be sure to contact your lender to let them know of your interest in the program. Many lenders are creating mailing lists to disseminate information as quickly as possible once additional rules and regulations have been released. 

Note that the loans/grants are intended to assist in paying operating expenses that are impacted by the COVID-19 pandemic. The PPP funds cannot be used to pay the same funds as the EIDL funds, but it is important to start with the EIDL application in order to receive the emergency grant as soon as possible. 

Our office is working hard to learn about these new laws and are staying updated as additional guidance is issued. We are available to assist wherever needed. Please contact us for additional information. 

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Federal Response to COVID-19 Part 1

The information below is a summary of the first legislation passed, which we received from Paychex.  It is a summary of relevant information so far.  This is not reflective of the second bill passed early this morning.

In general, the Families First Coronavirus Response Act dedicates tens of billions of dollars for paid sick and family leave, unemployment insurance, free COVID-19 testing, and other measures to help Americans impacted by the crisis. The final bill, which takes effect for most covered employers no later than 15 days after enactment and sunsets on December 31, 2020, contains numerous provisions affecting businesses and individuals.

Here is an overview of the key elements, which generally apply to private employers with fewer than 500 employees:

Emergency Family Medical Leave (FML) Expansion Act: Temporarily expands the provisions under the Federal Family and Medical Leave Act specifically to address COVID-19-related absences.

  • Eligible employees, who have worked for their employer for 30 days, who qualify for leave under the expanded reasons for leave, would be paid by their employer after the first 10 days of leave at a rate of no less than two-thirds of their current rate of pay.
    There is cap of $200 per day, up to a maximum $10,000, for up to 12 weeks in the benefit year.
  • Employees are permitted to take but employers cannot require the use of any other paid time off during their leave.
  • Employees covered under a multi-employer bargaining agreement are addressed separately in the legislation.

Some exemptions apply for employers of health care workers.

Payroll Credit for Required Paid Family Leave: This refundable tax credit is designed to reimburse 100 percent of wages paid by the employer under the new Emergency FML expansion for each calendar quarter.

  • The tax credit is allowed against the employer portion of the tax-imposed Social Security rate of 6.2 percent and the Medicare rate of 1.45 percent.
  • The amount is capped for each employee at $200 per day and $10,000 for all calendar quarters.
  • If the credit exceeds the employer’s total liability of the employer portion of Social Security and Medicare in any calendar quarter, the excess credit is refundable to the employer.

Specific rules apply that prevent a double tax benefit.

Emergency Paid Sick Leave (PSL) Act: Employers are required to provide paid sick time, available for immediate use, to each employee requiring such time for specific reasons associated with the COVID-19 pandemic, including quarantines, currently seeking a diagnosis due to symptoms, or caring for an individual who is under quarantine or for a child whose school/care is closed due to COVID-19.

  • Provide up to 80 hours of paid sick leave (PSL) to eligible full-time employees and pro-rate part-time employee paid sick time based on the average number of hours regularly scheduled in a two-week period.
  • The calculation and caps for compensation vary dependent on the reason for leave with a maximum of $511 per day if the employee is the individual directly impacted and up to $200 per day if it is for care of someone else. Aggregate caps exist as well.
  • Employees may not be required to use other available paid time off before using paid sick time under this Act.
  • Employees covered under a multi-employer bargaining agreement are addressed separately in the legislation.
  • Some exemptions apply for employers of health care workers.
  • Employers will be required to post a notice of employee rights; the U.S. Secretary of Labor will provide a model notice within seven days of enactment.
  • Paid sick time provided under this Act is not preempted by other federal, state, or local law.

Payroll Credit for Required Paid Sick Leave (PSL): This refundable tax credit is designed to reimburse 100 percent of wages paid by the employer under the new Emergency PSL for each calendar quarter.

  • The tax credit is allowed against the employer portion of the tax imposed Social Security rate of 6.2 percent and the Medicare rate of 1.45 percent.
  • The amount is capped at the maximums of $511 or $200 per day, depending on the reason.
  • If the credit exceeds the employer’s total liability of the employer portion of Social Security and Medicare in any calendar quarter, the excess credit is refundable to the employer.
  • Specific rules apply that prevent a double tax benefit.
    Other General Provisions:

Emergency Unemployment Insurance Stabilization and Access Act of 2020: The bill provides $1 billion in emergency grants to states for activities related to facilitating unemployment insurance benefits, under certain conditions.

  • $500 million will be used to provide immediate additional funding to all states for staffing, technology, systems, and other administrative costs, provided certain requirements are met.
  • The remaining $500 million would be set aside in reserve for emergency grants to states which experienced at least a 10 percent increase in unemployment. Those states would be eligible to receive an additional grant, if certain conditions are met.
  • The U.S. Secretary of Labor will also work with states that want to implement work-sharing programs.
  • Coverage of Testing for COVID-19: Diagnostic testing and provider visits related to COVID-19 testing, including office visits, urgent care visits, and emergency room visits, must be provided without any co-pays, coinsurance, or deductibles.
    Additionally, no prior authorizations may be required for testing.
  • These provisions would apply to any health insurance plans, including individual and group health plans, Medicare, and Medicaid.
    Additionally, federal funding will be provided for uninsured individuals to receive reimbursement for COVID-19 testing and related services.
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Employer Layoffs amid COVID-19

Press Release from the State Department of Labor and Economic Opportunity

LANSING, MICH. The Department of Labor and Economic Opportunity today provided guidance to Michigan employers on how to avoid potential layoffs related to COVID-19.

“We know that many families and businesses are and will experience economic pain as a result of the COVID-19 pandemic,” said LEO Director Jeff Donofrio. “Through Governor Whitmer’s executive action and existing state programs, there are resources for employers affected by COVID-19. We are also strongly urging job providers facing work shortages to place their employees on temporary leave as opposed to termination, so that they may remain eligible for potential federal assistance.”

Work Share If employers are financially distressed but hope to continue operations by cutting back hours, they are encouraged to use the Unemployment Insurance Agency’s Work Share program that allows employers to maintain employment levels and business operations during declines in regular business activity rather than laying off workers. More information about the program can be found at www.michigan.gov/workshare.

Temporary Leave vs. Termination Due to the uncertainty regarding potential congressional action regarding whether and how furloughed workers will be able to access federal paid sick, family and medical leave resources, employers are strongly urged to place employees on temporary leave and advise the worker that they expect to have work available within 120-days as opposed to termination. There is no additional cost to employers, employees remain eligible for UI benefits through the state, and employees may remain eligible for potential federal assistance.

Steps for employers placing employers on temporary unpaid leave:
• Do not terminate the employee – specify a temporary/indefinite leave with return to work expected that is within 120 days.
• Do not create a contractual obligation to bring the employee back to work – Let the employee know that the situation is fluid and subject to change.
• Provide the employee with a formal Unemployment Compensation Notice. Employers will need to provide their Employer Account Number and Federal Identification Number.
• Communicate to the employee about their rights. Under Governor Whitmer’s recent Executive Order, workers are placed on leave, or are unable to work because they are sick, quarantined, immunocompromised, or have an unanticipated family care responsibility, are eligible for unemployment insurance benefits.
• Ensure employers are provided information on how to obtain unemployment insurance benefits. A factsheet can be found here.
• Get each employee’s up-to-date contact information.
• Let employees know if you will be putting updated information on the entity’s website or intranet, if applicable.
• Appoint a single, or limited number of individuals who will field questions, and communicate that information to employees.
• Keep a tally of all questions and answers. Periodically share with employees.

The state is monitoring issues related to continued medical insurance coverage and will update accordingly.

Elimination of Certain Unemployment Costs to Employers
Under the governor’s order, an employer or employing unit must not be charged for unemployment benefits if their employees become unemployed because of an executive order requiring them to close or limit operations.

Other Resources
The Michigan Economic Development Corporation’s call center stands ready to support businesses looking for assistance through other available state programs. For more information, visit the MEDC’s website: www.michiganbusiness.org or call 888.522.0103. The Michigan Small Business Development Center can also provide resources for small businesses impacted by COVID-19. Visit their website  for additional information.

Governor Whitmer is also seeking additional solutions for small businesses impacted by COVID-19. Earlier this month, Congress passed legislation that makes $1 billion available to the U.S. Small Business Administration (SBA) to provide low-interest loans to small businesses, small agricultural cooperatives, and nonprofits that have suffered substantial economic losses as a result of the COVID-19 pandemic.

The governor has informed SBA that she is seeking an Economic Injury Disaster Loan Declaration for the state and has initiated the process to receive the declaration from SBA. Once granted, small businesses in qualifying areas will be able to access low-interest loans through the SBA. In the interim, we are encouraging small businesses that could benefit from SBA loans to start collecting the information they’ll need to complete and submit their application. Examples of information needed can be found here. For additional information or to obtain help preparing the loan application in advance of the declaration, please contact the Michigan SBA offices in Detroit or Grand Rapids.

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